14th Feb 2007 08:00
HaiKe Chemical Group Ltd.14 February 2007 HaiKe Chemical Group Ltd First Day of Dealing on AIM and Placing HaiKe Chemical Group Ltd ("HaiKe" or the "Company", and together with itssubsidiaries, the "Group"), a petrochemical and speciality chemical businessbased in China, is pleased to announce its admission to AIM under the tickersymbol 'HAIK'. The placing has raised US$20 million (before expenses) for the Group. The netproceeds of US$17 million are to be used in the expansion of heavy oil catalyticcracking production facilities (US$14 million) and the expansion of isopropylalcohol production facilities (US$3 million). Placing Statistics +--------------------------------------------------+--------------------+|Placing Price |US$1.57 or £0.798 |+--------------------------------------------------+--------------------+|Number of new Ordinary Shares being placed on |12,738,854 ||behalf of the Company | |+--------------------------------------------------+--------------------+|Number of Ordinary Shares in issue following the |38,353,571 ||Placing | |+--------------------------------------------------+--------------------+|Market capitalisation of the Company at the |US$60.2 million ||Placing Price (following the Placing) | |+--------------------------------------------------+--------------------+|Gross proceeds to be raised by the Group in the |US$20 million ||Placing | |+--------------------------------------------------+--------------------+|Estimated net proceeds of the Placing receivable |US$17 million ||by the Group | |+--------------------------------------------------+--------------------+ Overview • HaiKe's principal products are gasoline and diesel oil produced through oil refining operations, as well as speciality chemical and biochemical products. For the year ended 31 December 2005, the Group generated sales of US$201 million and profit before tax of US$7.7 million. • The Group, founded in 1988, has four key operating subsidiaries: - Hi-Tech Chemical - production and sale of petrochemical products including gasoline, light fuel oils and diesel, in addition to a range of minor derivatives such as petroleum coke and liquefied gas - Hi-Tech Spring - production and sale of a number of speciality chemicals. Key products include dimethyl carbonate ("DMC"), pharmacy grade propylene glycol and isopropyl alcohol for medical applications, agricultural pesticides, food and the electronics sector - Hi-Tech Shengli - main products include sodium hydroxide based products, such as caustic soda, and a range of chlorine based chemical products - Tiandong Biochemical - main products are heparin sodium and low-molecular mass heparins, such as enoxaparin sodium and dalteparin sodium. 100% of Tiandong Biochemical's products are exported to the USA, Chile, Argentina, Germany and other European countries. • The Group's operations are located close to the Shengli oil field, the second largest oil field in China, and benefits from a good supply of key raw materials. In addition, the proven track record of the management team and the industry's high barriers to entry strengthens the Group's established market position. • The Group currently has annual oil refining capacity of approximately 1 million tonnes (7.54 million barrels). HaiKe's current production capacity of speciality chemicals and biochemicals is 100 thousand tonnes, with a number of the Group's speciality chemical products holding leading positions in the domestic market in terms of total production capacity. • The Directors believe that the Group conforms to all applicable safety and environmental regulations in all material respects. In addition, the Group has adopted advanced technology to substantially reduce the release of wastes. Growth Strategy The Group intends to expand its production capacity and increase sales by asequence of carefully planned investment projects in both the petrochemical andspeciality chemical sectors. Following Admission, HaiKe intends to invest in itsrefining business with an emphasis on the installation of heavy oil catalyticcracking equipment. This will enable the Group to process a wider slate of crudeoil and manufacture greater quantities of higher value, lighter products such aslight fuel oil, diesel and liquefied gas. The Directors anticipate that Hi-TechChemical's refining facilities will have an additional annual productioncapacity of approximately 800,000 tonnes by early 2008, in addition to thecurrent capacity of approximately 1 million tonnes (7.54 million barrels). The Group intends to strengthen its leading position in the speciality chemicalmarket by adopting new processing technologies to improve production efficiencyand reduce production costs. In addition to the ongoing expansion in productionof DMC and propylene glycol, the Group intends to invest a proportion of theproceeds from the placing into the continued expansion of isopropyl alcohol.This is anticipated to generate the Group an additional 30,000 tonnes ofisopropyl alcohol per annum by 2009, in addition to the current capacity of30,000 tonnes. The principal drivers of growth are: • China's current demand for refined oil products is exceeding its refining capacity and, as a result, the Directors believe that there is significant potential for the Group to increase its sales volume of refined products. In addition, following China's ascension to the WTO, the Chinese government is generally expected to relax pricing restrictions on gasoline and diesel during 2007. The Directors believe that this change in Government policy will enable the Group to sell its principal products at prices which are closer to world market prices. • The rapid growth in the Chinese economy has led to an increase in demand for speciality chemicals and, despite expansion in domestic production in recent years, total supply still lags behind total demand in China. The Directors believe that as a result of strong government support, robust market demand, together with the anticipated increase in the level of investment in China, the demand for speciality chemical products should continue to grow. • The global market for biochemical products has grown significantly. The Directors believe Tiandong Biochemical is well placed to take advantage of this market in the future. Tiandong Biochemical is currently a leading exporter of heparin sodium in terms of quantity. Commenting on the IPO, Mr. Xiaohong Yang, Executive Chairman, said: "The response from the institutional investors to the fund raising has beenoverwhelming and we are delighted that so many have recognised the potential ofHaiKe. Demand for refined products in China continues to exceed refiningcapacity and with our leading position in speciality chemicals, we are wellplaced to exploit this significant opportunity. The proceeds raised through ourentry to AIM will enable the Group to continue the expansion of its currentproduction capabilities, in order to meet this growing market. We believe HaiKeis in a very strong position with robust markets, strong government support anda solid platform for growth. We look forward to an exciting future and theopportunity to deliver value for our shareholders." For further enquiries: +----------------------+-----------------------+---------------------+|HaiKe |Johnson Lau, CFO |+86 546 8288032 |+----------------------+-----------------------+---------------------+|HansonWesthouse |Tim Metcalfe |+44 (0) 20 7601 6100 || |Anita Ghanekar | || |Martin Davison | |+----------------------+-----------------------+---------------------+|Cardew Group |Rupert Pittman |+44 (0) 20 7930 0777 || |Shan Shan Willenbrock | || |Emma Consett | |+----------------------+-----------------------+---------------------+ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Haike Chemical Group